Assembly bill caps public worker pensions

UC PENSIONS

Published 4:00 am, Friday, January 7, 2011

Spooked by the University of California's pension revolt - in which its highest paid executives are threatening to sue unless UC fattens their retirement benefits - a Democratic state lawmaker introduced a bill Thursday to prevent all public employees from gaining dramatically increased pension benefits.

And Republicans are applauding.

"You're witnessing a moment of bipartisan joy," said Assemblyman Tim Donnelly, R-San Bernardino, vice chairman of the Higher Education Committee. "I'm ashamed that I didn't think of this myself."

The UC executives, some of whom earn more than $700,000 a year, want their pensions calculated as a percentage of their full salary, not just the first $245,000, the cap imposed by the Internal Revenue Service.

But the cap was meant to keep private companies from squirreling away a lot of money in tax-deferred retirement accounts, and the IRS typically grants waivers to tax-exempt agencies. UC won its waiver in 2007, and the executives say UC is required to hand over the bigger pensions - retroactive to 2007 - because the regents voted in 1999 to do so once the IRS approved.

They also say it is the only way to attract and retain good employees. But UC, which is trying to close a $21 billion gap in unfunded retirement obligations, says lifting the cap is too expensive.

So does Assemblyman Jerry Hill, D-San Mateo, whose AB89 would require all public retirement programs in California, including UC's, to adhere to the IRS cap when calculating benefits for employees who join the retirement system after Jan. 1, 2012.

Hill called it "outrageous and irresponsible" that 200 well-paid UC executives would gain tens of thousands of dollars a year in retirement income - more than $100,000 in some cases - by lifting the cap.

"They really need to come down from their ivory tower and see and feel what real people are going through," he said.

Republican Donnelly said he was "appalled at the arrogance" of the executives, and said the bill should apply to pensions immediately, not beginning next year.

Hill said he introduced the bill after reading Chronicle stories about 36 UC executives who signed a letter last month demanding that the regents lift the pension cap. They earned between $174,000 and $756,000 in 2009, the latest figures available.

The executives include five at UCSF, two at UC Berkeley, and 10 at UC headquarters in Oakland.

Although state lawmakers generally cannot tell the autonomous public university what to do, Hill said state laws can apply to UC if they are also aimed at other public agencies and not UC alone.

UC leaders have vigorously opposed past efforts by the state to order them about.

But in this case, President Mark Yudof and regents Chairman Russell Gould don't want to raise the pension cap and issued a joint statement Tuesday claiming they were under no legal obligation to do so.

On Thursday, they did not immediately object to Hill's bill, saying it seemed consistent with their position.

"But we'll need to review it before we can comment further," said Steve Montiel, a UC spokesman.

State Sen. Mark Leno, D-San Francisco, on Thursday urged the executives to retract their demand.

"It just begs a legislative response, whether it's the proposal by Assemblyman Hill or any other that may follow," Leno said. "It is ill-conceived on the executives' part to pursue this any further."

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Though the executives have been largely silent since the controversy broke Dec. 29, one of the signers, Chris Edley, dean of the UC Berkeley Law School, has said they will stand firm.

He said the signers "disagree with UC staff about what's fair, necessary and wise."

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